Update and repost: Gold price manipulation

There is a continuing argument over whether the gold price is manipulated and we feel that it is – along with virtually every other market out there – by institutions with sufficient funds to exert a degree of control.  That seems to be an integral part of the modern-day investment sector, whether one considers this ethical or not.  It is perhaps a key part of the capitalist system where wealth creation and enhancement is the ultimate goal of the financial  elite.

Is gold a special case?  Or is silver?  Investors in these precious metals certainly believe so and we feel there is sufficient evidence out there to say definitely yes.  And far greater forces than that of pure financial speculation is almost certainly involved, at least from time to time, when for the powers that be things start to be getting out of hand as they see it.

Why should gold in particular be a special case?

In many peoples’ eyes gold has been the ultimate form of money and indicator of wealth for centuries and since the world entered the 100% fiat currency era after President Nixon closed the gold window in 1971, before which the world’s principal global reserve currency was still backed by gold, many still see gold as the ultimate bellwether as an indicator of the true strength of these currencies and of the dollar in particular.  Control the bellwether and you control the herd!

The Gold Anti Trust Action Committee (GATA) has preached gold price suppression, implemented by the major central banks (the U.S. Fed in particular) with government support allied with the monetary power of the bullion banks to do so.  GATA has been very successful in procuring various government documents, memos and emails which would support their case. This documentation recognises that at various points in time gold has most certainly been on the agenda of the political and financial elite and needs to be controlled due to recognition that the gold price can pose a threat to their economic management and the overall picture they are trying of a stable currency and economy to present to the people.  Couple this with ongoing media propaganda downplaying gold’s power as an investment and such intervention can probably be kept to a minimum with investors and markets doing much of their dirty work for them most of the time.

But not all of the time!  Every now and then the gold price threatens to get out of control and more drastic measures are needed to knock it back.  Hence the flash crashes when huge futures transactions, often when major markets are mostly closed, are implemented with the seemingly intended purpose to knock prices sufficiently to trigger stop-loss computer trading and thus drive the price down even further.  These are a relatively recent phenomenon and are too frequent to be coincidental.  Indeed they are blatant.

This was perhaps exemplified – one might say trialled – in the much smaller silver market back in April 2011 when the silver price was soaring up close to $50 an ounce.  While silver may no longer be truly a monetary metal it still has monetary correlations in the eyes of many and while the silver price tends to move broadly in concert with gold, but with greater extremes, there would have been the fear that in this case the tail could be wagging the dog and if the silver price was allowed to continue its upwards path it could drag gold along with it.

But while the silver price was very successfully knocked back, gold managed to continue on its own upwards path for another 5 months and in August/September 2011 gold fever was in full swing and the yellow metal too looked to be taking off out of control.  Cue another huge flash crash, this time in gold.  The amount of capital at risk in the futures markets to implement this might be seen as exceptional with the theory that this was put in place by the bullion banks with central banks and government support.  True only circumstantial evidence here, but the numbers suggested something hugely more than any normal trading activity.

Once this was seen to be successful, so the theory goes, almost every time some piece of government data, or world news, seen as potentially strongly gold positive has been released there has been an almost instantaneous similar, but smaller, flash crash implemented through big futures transactions – always seemingly designed to take the price down to stop-loss selling levels.  Coupled with a Fed easing programme designed to boost the general stock markets these have turned investor sentiment away from gold very successfully and the price has mostly been drifting downwards.

So what next for gold?  The gold investment fraternity will be hoping that the huge gold flows from West to East and the likely prospect of China eventually wresting control of gold benchmark price setting from London will reduce the power of COMEX futures market dominated price manipulation.  But China itself may then well set its own price manipulation process in place – it certainly has the financial power to do so -although the agenda and price direction may be different!  We shall see.

For more on this subject and more on what’s been happening in the silver market, readers should take a look at my other recent article on this subject on Mineweb – See: Gold price manipulation: Who really calls the tune? and an earlier article What’s with JPMorgan and its massive silver hoard?

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